UNION OF INDIA vs. M/S. GANPATI DEALCOM PVT. LTD. TTHROUGH MANAGING DIRECTOR

REPORTABLE N THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL No. 5783 of 2022 [@ SPECIAL LEAVE PETITION (C) NO. 2784/2020] UNION OF INDIA & ANR.                          … APPELLANT(S) VERSUS M/s. GANPATI DEALCOM PVT. LTD. … RESPONDENT(S) JUDGMENT   N.V.   RAMANA    , CJI     1. Leave granted. 2. This   case   involves   a   tussle   between   the   normative   and positivist   positions   regarding   the   nature   of   a   crime   and punishment.   Treating   the   Constitution   as   a   flag   post,   a result of this tussle is sought in the following deliberation.   3. This appeal is filed against the impugned judgment dated 12.12.2019   passed   by   the   High   Court   of   Judicature   at Calcutta in APO No. 8 of 2019 along with Writ Petition No. Signature Not Verified Digitally signed by Rajni Mukhi Date: 2022.11.02 17:59:59 IST Reason: 687 of 2017.   1 4. The   short   legal   question   which   arises   for   this   Court’s consideration is whether the Prohibition of Benami Property Transactions   Act,   1988   [for   short   ‘the   1988   Act’],   as amended   by   the   Benami   Transactions   (Prohibition) Amendment   Act,   2016   [for   short   the   ‘2016   Act’]   has   a prospective effect. Although a purely legal question arises in this   appeal,   it   is   necessary   to   have   a   brief   factual background in mind before we advert to the analysis.   5. On   02.05.2011,   the   respondent–company   purchased   a property   in   its   name   from   various   sellers   for   a   total consideration   of   Rs.9,44,00,000/­.     It   is   said   that   the consideration for the aforesaid purchase was paid from the capital   of   the   company.     On   31.03.2012,   99.9%   of   the respondent–company shareholdings were acquired by M/s PLD Properties Pvt. Ltd. and M/s Ginger Marketing Pvt. Ltd. at a discounted price of Rs.5/­ per share for a total amount of   Rs.19,10,000/­.     It   is   a   matter   of   fact   that   the   two directors   of   the   respondent­company   (viz.   Shruti   Goenka and Ritu Goenka) also held directorship in the subsequent purchaser company.    2 6. Accordingly, on 29.08.2017, the Deputy Commissioner of Income Tax (Adjudicating Authority) issued a notice to the respondent–company invoking Section 24(1) of the 2016 Act to show cause as to why the aforesaid property should not be   considered   as   Benami   property   and   the   respondent company as Benamidar within the meaning of Section 2(8) of the 2016 Act.  On 06.09.2017, the respondent–company replied to the aforesaid show­cause notice denying that the scheduled property is a Benami property. 7. The   Adjudicating   Authority,   by   order   dated   24.11.2017, passed an order under Section 24(4)(b)(i) of the 2016 Act, provisionally attaching the property. 8. Aggrieved   by   the   aforesaid   attachment   order,   the respondent­company filed a Writ Petition (being W.P. No. 687   of   2017)   before   the   High   Court   of   Calcutta.     The aforesaid writ petition was disposed of by the learned Single Judge by an order dated 18.12.2018 with a direction to the Adjudicating Authority to conclude the proceedings within 12 weeks.   9. Aggrieved, the respondent­company filed an appeal against the aforesaid order being APO No. 8 of 2019.   3 10. The   High   Court,   vide   impugned   order   dated   12.12.2019, while   quashing  the   show­cause  notice   dated  29.08.2017, held   that   the   2016   Act   does   not   have   retrospective application.   (i) The 2016 Amendment Act, which came into force on 01.11.2016,   was   a   new   and   substantive   legislation, inter alia, substituting and widening the definition of ‘benami   property   and   benami   transaction’,   and   in order to have retrospective operation for the period or transactions   entered   into   prior   to   01.11.2016,   a provision to that effect should have been specifically providing under the said Act; in the absence of any express provision to that effect, simply by virtue of the provisions contained in subsection (3) of Section 1 of the 1988 Act [which remained unaltered by the 2016 Amendment Act, and have consequently been retained under   the   Benami   Act],   the   provisions   of   the   2016 Amendment   Act   cannot   be   impliedly   construed   as retrospective; (ii) Reference was made to and reliance was placed on the unreported ruling of the learned Single Judge of the Rajasthan High Court dated 12.07.2019 in the case of Niharika   Jain   v.   Union   of   India   [S.B.C.W.P.   No. 2915/2019], wherein, following the ruling of the Single Judge of the Hon’ble Bombay High Court in the case of Joseph   Isharat   v.   Mrs.   Rozy   Nishikant   Gaikwad [S.A.   No.   749/2015;   decided   on 01.03.2017/30.03.2017], it was held that in terms of the protection enshrined under clause (1) of Article 20 of the Constitution of India, the 2016 Amendment Act, amending,   inter   alia,   the   definition   of   “benami transaction”,  could  not be  given retrospective  effect, and   the   amendments   brought   about   vide   the   said (amendment) Act would be enforceable only with effect from the date of the enactment / coming into force of the said amendment Act i.e., on or after 01.11.2016 – reliance in this regard was also placed on the ruling of 4 this Court in the case of  Rao Shiv Bahadur Singh vs.  AIR 1953 SC 394; State of Vindhya Pradesh, (iii) The 1988 Act, which came into force on 19.05.1988 [except Section 3, 5 and 8 thereof which came into force   on   05.09.1988],   provided   for   punishment   for persons entering into a “benami transaction”, which was   made   non­cognizable   and   bailable,   and   also however, provided for acquisition of property held to be benami;   provisions   of   the   1988   Act,   were   never operationalized since the rules and procedure required to be framed under Section 8 of the said Act bringing into existence the machinery for implementation of the 1988 Act, were never notified – therefore, although the 1988 Act was part of the statute book, the same was rendered   a   “dead   letter”,   and   all   transactions   and properties   alleged   ‘benami’,   carried   out   /   acquired between   the   period   of   19.05.1988   and   01.11.2016, were   deemed   to   have   been   accepted   by   the Government as valid ‘vesting rights’ in the parties to such   alleged   transactions;   ,   the   Central ergo Government, having waived its right of implementation and operationalisation of the 1988 Act for the period prior to 01.11.2016, cannot now do so indirectly by way of retrospective operation of the 2016 Amendment Act. 11. Aggrieved by the aforesaid impugned order, the Union of India is in appeal before this Court. 12.   S UBMISSIONS   12.1 Shri S.V Raju, learned Additional Solicitor General (‘ASG’) has contended as under: 5 i. As   per   the   pre­amendment   Act,   there   was   no machinery   or   procedure   in   place   to   effectuate proceedings   against   Benami   transactions.   It   is submitted that in order to remedy this mischief of lack of procedure, the Amendment Act, which was a consolidating Act, was brought in. ii. It   was   not   an   offence   that   is   sought   to   be implemented   retrospectively,   but   merely   the procedures are laid down to implement the Act of 1988. He stated that the pre­amendment Act already recognizes Benami transactions as contrary to law, and hence no new or substantive law is being made. iii. It is settled law that procedural law can be applied retrospectively,   and   the   bar   against   retrospective application is only applicable to substantive law. iv. The legislative intent for bringing an amendment to the existing act, and not enacting a new law, was to ensure that no immunity is granted to persons who engaged   in   benami   transactions   while   the   pre­ amendment Act was in operation. 6 v. It was further submitted that Section 5 and Section 27 of the Act are to be read together as the latter provides the mechanism through which the Benami property   may   be   confiscated   by   the   Adjudicating Authority. As per Section 27(3), once the confiscation order is passed by the Authority, the rights in the property are vested in the Central Government.   It was   reiterated   that   confiscation   is   not   a   penal provision, as the same has civil consequences. Both, acquisition and confiscation are civil in nature, and therefore,   they   can   be   used   interchangeably. Therefore,   any   amendment   act   which   is consolidating in nature, can have provisions which are   confiscatory   in   nature   and   the   same   can   be applied   retrospectively.  For   this,   the   learned   ASG

that   in   this   judgment,   this   Court   has   held   that confiscation is not a punishment, and that Article 20(1)   is   not   attracted.   The   Court   also   held  that confiscation   as   imposed   by   the   Adjudicating 7 Authority would not amount to any punishment, and is only a deprivation of the property of the person in question.  vi. The learned ASG also referred to  Mithilesh Kumari

submit that by necessary implication, the machinery and procedural provisions of the amended Act are retrospective in nature. 12.2 Shri   Vikramjit   Banerjee,   learned   ASG   has   submitted   as under: i. The Parliament has the power to enact retrospective legislation even in case of a criminal Statute, as long as it   complies   with   Article   20(1)  of   the   Constitution   of India.   He   further   argued   that   as   per   Article   20(1), prohibition exists only on conviction and sentencing of the   ex­post   facto  law, and not against passing such a law.  ii. Forfeiture,   acquisition,   and   confiscation   are   not punishments and therefore not subject to Article 20(1) 8 restrictions. He then pointed out that the adjudication proceedings are also not in the nature of prosecution, and hence cannot be restricted by Article 20.  iii. That   acquisition   of   property   without   paying compensation   amounts   to   confiscation,   and confiscation envisages a civil liability.  12.3 Dr.   Abhishek   Manu   Singhvi,   learned   Senior   Advocate appearing for the respondent has contended as under: i. The   1988   Act   did   not   make   its   provisions   applied retrospectively.   The   Parliament   purposely   ensured that when the 1988 Ordinance was replaced by the parent   Act,   only   the   provisions   from   the   1988 Ordinance   were   continued   from   the   date   of   the promulgation of the ordinance. The other provisions introduced by the parent Act, namely Sections 3, 5 and 8, were made only prospectively applicable from the date on which the parent Act was brought into effect. ii. The 2016 Act was not intended to be retrospectively applicable   as   the   same   is   not   explicitly   stated. 9 Parliament   deemed   it   fit   to   leave   it   to   the   Central Government   to   enforce   the   2016   Act   from   an appointed date by notifying it in the official gazette, as mentioned in Section 1(2) of the 2016 Act. iii. It was further argued that when the statute carves out distinct penalties in respect of benami transactions entered into in the unamended regime   vis­a­vis   the benami   transactions   entered   into   after   the amendment Act of 2016, it clearly indicates that the amended Act is prospective in nature.  iv. Learned Senior Advocate also relied on the cases of   R. Rajagopal   Reddy   v.   Padmini   Chandrasekharan, (1995)   2   SCC   630   and   Mangathai   Ammal   v. Rajeswari ,   (2020)   17   SCC   496,   in   the   context   of Sections   4(1),   4(2)   and   3(2)   of   the   parent   Act,   to contend   that   the   abovementioned   provisions   are prospective in nature. v. It is also argued that insertion of Section 2(9) by an amendment   to   the   parent   Act   provides   a   new definition   to   benami   transactions   and   has 10 substantially   changed   the   scope   of   the   offence   by enlarging   its   ambit.   In   the   unamended   Act,   only transfer   of   property   was   an   offence.   However,   the 2016 Act has added multiple other actions as offences under the category of benami transactions. It is a well settled   principle   of   law   that   any   enactment   which substantially affects the rights of people cannot be applied   retrospectively,   and   therefore,   the   amended 2016 Act can only be prospective in nature. For this, the   judgment   of   this   Court   in   the   case   of Commissioner   of   Income   Tax   (Central)­I,   New Delhi v. Vatika Township Pvt. Ltd,  (2015) 1 SCC 1 was relied on. 13.I   NTRODUCTION   TO   PRACTICE   OF   PROPERTIES   HELD   BENAMI   IN  I NDIA   13.1 Having heard the parties, it is necessary for this Court to trace the   history   of   benami   transactions   in   India.   The   term ‘benami transaction’ generally implies that one purchases the property in the name of somebody else, i.e., a name lender, and the purchaser does not hold beneficial interest 11 in the property. Literally, ‘benami’ means ‘without a name’. The   simplest   of   example   is   if   person   ‘A’   (real   owner) purchases   a   property   from   ‘B’   in   the   name   of   ‘C’ (benamidar/ostensible   owner),   wherein   ‘A’   exercise rights/interest over the property. 13.2 The term ‘benami’, which was alien to statutory law during the colonial regime and in the early days of the Republic, was   known   in   the   legal   parlance   of   lawyers.   Even   in Mohammedan   law,   such   transactions   were   commonly 1 referred as  furzee  or  farzi , derived from Arabic word  furaz . Over the passage of time, this nebulous concept appeared in cases   without   much   clarity   with   respect   to   its   basic contours.   Conceptually,   there   are   two   views   which   arise from   the   Doctrine   of   Benami.   The   first   view   is   that   the benamidar does not hold title over the property, and the second   view   is   that   although   the   title   passes   to   the benamidar, he holds it in trust.  13.3 Eventually,   there   developed   two   loose   categories   of transactions that were colloquially termed as benami, which can be explained through the following examples: 1 McNaughten’s Selected Report Vol. I, Reporter’s Note at p. 368. 12 (i.) Tripartite: ‘B’ sells a property to ‘A’ (real owner), but   the   sale   deed   mentions   ‘C’   as   the owner/benamidar.  (ii.) Bipartite:   ‘A’   sells   property   to   ‘B’   without intending to pass the title to ‘B’. The   first   instance   was   usually   termed   as   a   real   benami transaction,   and   the   second   transaction   was   considered either   as   a   sham   transaction   or   “loosely”   benami transaction.   In   Sree   Meenakshi   Mills   Ltd.   v. Commissioner of Income Tax, Madras , AIR 1957 SC 49, speaking for the Bench, Venkatarama Ayyar, J., stated that the   first   category   of   transactions   is   ‘usually’   termed   as benami,   while   the   second   category   is   ‘occasionally’ considered   a   benami   transaction.   He   added   that   it   is “perhaps not accurately so used”. In  Thakur   Bhim Singh , AIR 1980 SC 727, Venkataramiah, v. Thakur Kan Singh J. straightway called the first category as benami but chose to describe the second category as “loosely” termed benami. This distinction is relevant and will be adverted to later. 13 13.4 Numerous reasons, some desirable and some undesirable, were   contributory   factors   for   the   proliferation   of   such   a practice in India. Some of them are as follows: (i) Secret provisions for families within Hindu Joint 2 family system;   3 (ii) Mitigation of political and social risk;   4 (iii)Defrauding creditors;   (iv)Evasion of taxes. 13.5 Judicial recognition of such transactions came about in the th early 19   century under the colonial courts. In   Mt.   Bilas , AIR 1915 PC 96, the Privy Kunwar v. Desraj Ranjit Singh Council observed as under: “Down   to   the   taluqdar’s   death   the   natural inference is that the purchase was a benami transaction; a dealing common to Hindus and Muhammadans   alike,   and   much   in   use   in India; it is quite  unobjectionable and has  a curious   resemblance   to   the   doctrine   of   our English law that the trust of the legal estate results   to   the   man   who   pays   the   purchase money, and this again follows the analogy of our   common law,   that  where  a  feoffment  is made without consideration the use results to the feoffer.” 2 West and Buhler, ‘Hindu Law’, (Fourth Edition), Pg. 157, 563. 3 Pollock, The Law of fraud, Misrepresentation and Mistake in British India (1894), page 83­ 84. 4 K. K. Bhattacharya, Joint Hindu Family, (Tagore Law Lectures) (1884­85) Pg. 469­470. 14 In  Punjab Province v. Daulat Singh , AIR (29) 1942 FC 38, the Federal Court, while evaluating the propriety of such transactions, observed as under: “A   notion   has   sometimes   prevailed   in   this country that all benami transactions must be regarded as reprehensible and improper if not illegal;   but,   as   late   as   in   1915,   Sir   George Farwell, delivering the judgment of the Judicial Committee in 37 ALL. 557 spoke of them as ‘quite   unobjectionable’   and   as   having   their analogues in the English law; and Mr. Amreer Ali, delivering the judgment of the Committee in 46 Cal. 566, observed that “there is nothing inherently wrong in it, and it accords, within its legitimate scope, with the ideas and habits of the people”. As indicated by the qualifying words   “within   its   legitimate   scope”,   their Lordships’ observations were clearly not meant to countenance transactions entered into for fraudulent or illegal purposes.” 13.6 In  , AIR 1974 SC 171, this Jaydayal Poddar v. Bibi Hazra Court laid down a test to determine whether a transaction is benami or not. The following factors were to be considered:  (i) The source from which the purchase money came; (ii) The nature and possession of property after purchase; (iii) Motive,   if   any,   for   giving   the   transaction   a   benami colour; (iv) The position of the parties and the relationship, if any, between the Claimant and the alleged Benamidar. (v) The custody of the title­deeds after the sale, and 15 (vi) The conduct of the parties concerned in dealing with the property after the sale. 13.7 The judiciary came to establish the general principle that in 5 law, the real owner is recognized over the ostensible owner. This   principle   had   certain   statutory   exceptions,   albeit limited, such as Section 66 of Civil Procedure Code, 1908 with   respect   to   properties   wherein   sale   certificates   are issued by courts; and Section 281A of the Income Tax Act, 1961, which allows filing of suit by the original owner to enforce his right over a benami property, only if the same is declared for taxing purpose, as provided thereunder. Such provision   under   the   Income   Tax   Act   did   not   bar   such benami transactions completely, rather it only attempted to legitimize and bring them into the net of  taxation. Such provision,   while   disincentivizing   transactions   beyond   the taxation   net,   had   also   inevitably   accepted   the   positive factors in recognizing the same. Further, it is a matter of fact that the Indian Trusts Act has recognized and accepted the principle behind benami transactions. 5 Murlidhar Narayandas v. Paramanand Luchmandas , AIR 1932 Bom. 190;   Radhakishan Brijlal v. Union of India , AIR 1959 Bom. 102 (V46 C40);   Gur Prasad v. Hansraj , AIR (33) 1946 Oudh. 144. 16 th 13.8 The 57   Report of the Law Commission (1973) succinctly captures the general principles prevailing as on that date, in the following manner: “5.2   Summary of present position ­in general­A few basic points concerning benami transactions may be stated, as follows: (a)Benami transfer or transaction means the transfer by or to a person who acts only as the ostensible owner in  place  of real owner whose name is  not disclosed; (b)The question whether such transfer or transaction was real or benami depends upon the intention of the beneficiary; (c) The   real  owner   in  such  cases   may   be   called   the beneficiary,   and   the   ostensible   owner   the benamidar. … 5.3.  Effect of benami transfer .­ The effect of a benami transfer is as follows:­ (a)A person does not acquire any interest in property by merely leading his name; (b)The benamidar has no beneficial interest though he may re­present the legal owner as to third person. (c)A benami transaction is legal, except in certain specified situations. (Emphasis supplied) 13.9 Prior to the 1973 Report, the broad position on the legality of various kinds of benami transactions can be captured as follows:

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18

19 13.10 It   may   be   necessary   to   note   that   the   Law   Commission, th through   its   aforementioned   57   Report,   did   not   find   it suitable to accept the stringent provision of making benami transactions   liable   to   criminal   action.   Rather,   it recommended   adoption   of   certain   less   stringent,   civil alternatives in the following manner: “6.3.   Possible   alternative   for   regulating   benami transaction . ­ Several possible alternatives could be thought of, with reference to prohibiting or regulating benami transactions for avoiding prejudice to private individuals or minimising litigation:­ (i) Entering into a Benami transactions could be made an offence; (ii) A provision may be enacted to the effect that in a civil suit a right shall not be enforced against the benamidar or against a third person, by or on behalf of the person claiming to be the real owner of the property on the ground of benami; a similar provision could be made to bar defences on the ground of benami. (This   provision  would   be   based   on   the   principle   on which the existing provisions in the Civil Procedure Code and the new provision in the Income­tax Act are based but could be wider in scope and more radical). ­ (iii) The present presumption of a resulting trust in favour of the person who provided the consideration may be displaced (as in England) by the presumption of advancement, in cases where the person to whom property is transferred is a near relative of the person who provided the consideration. (This would bring in the   doctrine   of   advancement,   so   as   to   rebut   the presumption of resulting trust under section 82 of the Trusts Act). 20 Whichever alternative is adopted, it may be desirable to make an exception for an acquisition made by the manager of a joint Hindu family in the name of one of the co­parceners, and similar cases. … 6.24.  First alternative not likely to be effective ­The first   alternative   referred   to   above,   namely,   the imposition   of   a   criminal   prohibition   against   benami transactions, is the most drastic alternative, but it is not   likely   to   be   more   effective   than   the   others.   A prohibition backed by criminal sanctions would not, moreover, be desirable, unless the mens rea is also included in the provision to be enacted.  If this alternative is to be adopted, a provision could be enacted on the following lines:­­ "Where   property   is   transferred   to   one   person   for   a consideration paid or provided by another person, and it appears that such person did not intend to pay or provide   such   consideration   for   the   benefit   of   the transferee,   the   person   paying   or   providing   the consideration shall be guilty of an offence punishable with imprisonment upto three years, or with fine, or both.  Provided that this section shall not apply where the transferee is a co­parcener in a Hindu undivided family in which such other person is also a co­parcener, and it is proved that such other person intended to pay or provide such consideration for the benefit of the co­ parceners in the family. Exception­­Nothing in this section shall be deemed to affect section 66 of the Code of Civil Procedure, 1908 or any provision similar thereto." Yet   another   device   for   giving   effect   to   the   first alternative, with a requirement of mens rea, would be to have a law on the following lines: "Where property is transferred to one person for a consideration paid or provided by another person, and it appears that such person did not intend to pay or provide such consideration for the benefit 21 of the transferee, the person paying: or providing the   consideration   shall,   if   he   has   caused   the transfer to be entered into with the intention of facilitating the evasion of any law, or defeating the claims of his creditors, or the creditors of any other person be guilty of an offence punishable with imprisonment upto three years, or with fine, or with both." Yet another device to give effect to the first alternative would be to add a section in the Indian Penal Code as follows­ "421A.   Whoever,   dishonestly   or   fraudulently causes   to   be   transferred   to   any   person,   any property,   for   which   transfer   he   has   paid   or provided the consideration, intending thereby to prevent,   or   knowing   to   be   likely   that   he   will thereby prevent, the distribution of that property according   to   law   among   his   creditors   or   the creditors   of   any   other   person,   or   intending thereby to facilitate, or knowing it to be likely that he will thereby facilitate, the evasion of any law, shall   be   punished   with   imprisonment   of   either description for a term which may extend to two years, or with fine. or with both." 6.25.   Second alternative . ­­The second alternative is less drastic than. the first. In form. it could follow the existing   statutory   provision   limiting   the   judicial recognition of benami transactions, such as, section 66. Code of Civil Procedure, 1908. But its scope would be much wider. The provision' could be to the effect that no suit shall lie to enforce a right in respect of any property   held   benami,   either   against   the   person   in whose name 'the property is held or against any other person, by or on behalf of a person who claims to be the real owner 'of the property on the ground that the person   in   whose   name   the   property   is   held   is   a benamidar of the claimant. (If necessary, a defence can also be barred). … 22 6.27.   Second   alternative   refusal   to   recognise   ­­   In   our   opinion,   the   simplest Benami   preferred. alternative would be the second alternative. The law should refuse to­ recognise the Benami character of transactions, without making them an offence. The law should,   in   effect,   provide   that   where   property   is transferred   benami,   the   benamidar   will   become   the real owner. The result of such a provision will be that the   fact   that   the   benamidar   did   not   provide   the consideration, or that the consideration was provided by a third person, will not be a ground for recognising a person other than the benamidar as owner. To put the matter in broad terms, the doctrine of benami will, under the pro­ posed amendment, cease to be a part of the Indian law. It   may   be   observed   that   in   enacting   the   proposed provision,   the   legislature   will   carry,   to   its   logical conclusion, the trend illustrated by provisions, such as,   section   66   of   the   Code   of   Civil   Procedure.   The section   in the   Code is   applicable   to   involuntary alienations, while the proposed provision will extend the same principle to voluntary transactions as Well. We   think   that   this   will   be   the   simplest   and   most effective course, and is, therefore, preferable to others.  The amendment will bring out a change in the legal position in some of the situations where, at present, the benami character is re­ cognised. 6.27A. We are also of the view that it is not necessary to enact a prohibition attracting criminal penalties­­­­ which is the course suggested in the first alternative. Such a prohibition will have to be ac­ companied by a requirement   of   mens   rea,   thus   narrowing   down   its scope and limiting its practical utility.” 23 13.11 It must be noted that during this time, the Constitution was undergoing a slow churning  qua  the right to property. The above propositions, laid down by Federal Courts and Privy Council are to be understood in a context where there was a general common law right to property, which later made its forays into the Constitution of India under Articles 19(1)(f) and   31.   In   1978,   the   Indian   Parliament   took   a   drastic measure   and   did   away   with   this   fundamental   right   to property and relegated the same to a constitutional right under Article 300A. 13.12 Further,   it   was   an   era   during   which   India   pursued ‘socialism’, which was also included in the Preamble of the nd Constitution through the 42   (Amendment) Act in 1976. Successive judicial opinions in   Kesavananda Bharati v. State of Kerala,  (1973) 4 SCC 225  etc., viewed the right to property as a stumbling block in the path of achieving social goals that the government of the time aspired to. 13.13 In   1988,   an   Ordinance   –viz.   The   Benami   Transactions (Prohibition   of   the   Right   of   Recover   Property)   Ordinance, 1988   (Ordinance   2   of   1988.)   –   was   promulgated.   This 24 statutory instrument being not satisfactory, it  was referred to the Law Commission again. 13.14 In   any   case,   the   issue   was   re­examined   by   the   Law th Commission   in   the   year   1988   through   its   130   Report. th Although   the   Law   Commission   characterized   the   130 Report as a continuation of its earlier recommendations, it can be observed that some radical changes were suggested. Some of the key observations are as under: “3.2  The first question that must engage our attention at once is the width and coverage of   the   proposed   legislation.   In   order   to encompass   benami   transactions concerning various types of property, the legislation   should   cover   both   movable, immovable,   tangible   and   intangible property.   Unfortunately   every   type   of property,   such   as   land,   houses,   shares, debentures,   bonds,   bank   accounts, deposit   receipts   and   negotiable instruments,   is   capable   of   being   held benami. Therefore, it is equally legitimate to   have   an   extensive   coverage   of   the proposed   legislation   by   encompassing property of every denomination . … … 3.18 Therefore, viewed from either angle, the Law Commission is of the firm opinion that the legislation replacing the ordinance should also be retroactive in operation and that no locus penitentia need be given to the persons   who   had   entered   into   benami transactions in the past. They had notice of 25 one and half decades to set their house in order. No more indulgence is called for. … … 4.5Before we conclude on this chapter, it is necessary to point out that certain tax laws have   confirmed   legitimacy   on   the   benami transactions and derived benefit in the form of   revenue   collection   from   it.   It   was, therefore,   said   that   if   now   all   benami transactions   are   invalidated   and   an   all­ enveloping   prohibition   is   imposed,   the revenue laws would suffer loss of revenue. Reference  in  this  connection  was  made   to section   27   of   the   Income­tax   Act,   1962 dealing   with   income   from   house   property. The various sub­sections of section 27 deal with transfer of property by husband to wife and  vice­versa.       It also involves the case of   impartable   estate.   The   law   commission   is unable to appreciate how a total prohibition of benami transaction and the holder being made the real owner would defeat revenue laws. If one escapes, the other pays, and if it is   suggested   that   the   other   may   not   be within the dragnet of the tax laws and that both would benefit by the prohibition and abolition   of   benami   transactions.   In   the immediate   future   such   effect   may   be produced but the long term interest would help   in   defending   such   spurious transactions   between   husband   and   wife. Section 22 may be read accordingly. But it was pointed out that where transfer of flats is prohibited either by the rules of the co­ operative society which has built the flats or by   the   rules   of   authorities   like   the   Delhi Development   Authority,   a  modus   operandi has   come   into   existence   whereby   violating the law, the flat is sold and the purchaser would   pay   the   amount   and   taken   an 26 irrevocable power of attorney and enter into possession.   It   was   further   said   that   the provisions   of   the   Income­tax   Act   have recognized   such   transfers   and   treat   the attorney as owner for the purpose of income­ tax as per the provisions of the Finance Act, 1987.   If   the   sole   purpose   of   entering   into such a transaction is the violation of existing law   which   has   been   passed   after   due consideration, it is time that no recognition is conferred and the law is allowed to take its own course. Even in the name of revenue loss,   violation   of   existing   laws   cannot   be protected.  4.6The Law Commission would like to make it very clear that some of provisions of the tax laws may become anachronistic because of   the   present   approach   of   the   law commission. This is inevitable. The tax laws were enacted at the time when benami was a part of Indian law. Such laws would have to conform to the changing legal order. Yet a further solution is offered in this behalf in the next chapter.” ( emphasis supplied ) 14.   F RAMEWORK   UNDER   THE  1988 A CT   14.1 This brings us to the statutory framework under the 1988 unamended Act, having nine sections. Section 2(a) defines benami transactions as any transaction in which property is transferred   to   one   person   for   a   consideration   paid   or provided by another person. The law chose to include only tripartite   benami   transactions,   while   bipartite/loosely described   as   benami   transactions,   were   left   out   of   the 27 definition.   Reading   the   aforesaid   definition   to   include sham/bipartite   arrangements   within   the   ambit   would   be against the strict reading of criminal law and would amount to judicial overreach.   14.2 The above definition does not capture the essence of benami transactions as the broad formulation includes certain types of legitimate transactions as well. The transferee/property holder’s lack of beneficial interest in the property was a vital ingredient, as settled by years of judicial pronouncements and common parlance, and found to be completely absent in the definition given in the Act. On literal application of the aforesaid Section 2(a), the following transactions could have been caught in the web of the Act: (a)‘A’ purchases property in name of his son’s wife ‘B’, for the benefit of the son’s family from person ‘Y’, treats the consideration as a gift to the son, and pays gift tax on it. (b)‘A’ who is old and infirm, purchases a property in the name of ‘B’, intending that ‘B’ will hold the property in trust of the son of ‘A’, who is mentally retarded. (c) A firm ‘X’ purchases property in the name of the working partner   ‘B’   for   the   benefit   of   the   firm   ‘X’,   making   the payment out of the firm’s funds.   28 14.3 Section 2(c) of the 1988 Act defines property to be property of any kind, whether movable or immovable, tangible, or intangible,   and   includes   any   right   or   interest   in   such property. This definition appears to be broad and inclusive of  all   kinds   of   property   and   includes   various   rights   and interests. Interestingly, the aforesaid broad formulation of th property   came   about   for   the   first   time   in   the   130   Law Commission Report; such definitional broadening was for the   first   time   introduced   only   in   1988   and   was   never th contemplated   during   the   57   Report   (1973).   This   aspect becomes   important,   and   will   be   addressed   later,   while analysing the question of retrospectivity. 14.4 Section 3 of 1988 Act states as under: 3. Prohibition of benami transactions­  (1) No person   shall   enter   into   any   benami transaction.  (2) Nothing in sub­section (1) shall apply to the purchase   of   property   by   any   person   in   the name of his wife or unmarried daughter and it shall   be   presumed,   unless   the   contrary   is proved,   that   the   said   property   had   been purchased  for  the   benefit  of   the   wife   of  the unmarried daughter.  (3)   Whoever   enters   into   any   benami transaction   shall   be   punishable   with 29 imprisonment for a term which may extend to three years or with fine or with both.  (4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), an   offence   under   this   section   shall   be   non­ cognizable and bailable.  Section   3   puts   forth   a   prohibitive   provision.   Further,   it intended to criminalize an act of entering into a benami transaction.  14.5 Section 4 noted as under: 4.Prohibition   of   the   right   to   recover property held benami ­ (1) No suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person shall lie by or on behalf of a person claiming to be the real owner of such property.  (2) No defence based on any right in respect of   any   property   held   benami,   whether against   the   person   in   whose   name   the property is held or against any other person, shall be allowed in any suit, claim or action by or on behalf of a person claiming to be the real owner of such property.  (3) Nothing in this section shall apply,­­  (a)   where   the   person   in   whose   name   the property is held is a coparcener in a Hindu undivided family and the property is held for the benefit of the coparceners in the family; or 30 (b)   where   the   person   in   whose   name   the property is held is a trustee or other person standing   in   a   fiduciary   capacity,   and   the property is held for the benefit of another person for whom he is a trustee or towards whom he stands in such capacity.   14.6 Section 5 states: ­ 5. Property of benami liable to acquisition (1) All properties held benami shall be subject to   acquisition   by   such   authority,   in   such manner and after following such procedure as may be prescribed.  (2)   For   the   removal   of   doubts,   it   is   hereby declared that no amount shall be payable for the   acquisition   of   any   property   under   sub­ section (1).  It may be noted that Section 5 was never utilized as it was felt   that   there   was   requirement   of   additional   statutory 6 backing to make the law effective.   14.7 Section 6 provided that nothing in the 1988 Act will affect Section 53 of the Transfer of Property Act or any law relating to transfers for an illegal purpose. The object of Section 6 was to vest ownership rights in benamidars as opposed to the real owner. It was not the intention of the 1988 Act to protect such persons from creditors who allege diversion of th 6 Standing Committee on Finance 2015-2016, 16 Lok Sabha, Ministry of Finance (Deptt. of Revenue), The th Benami Transactions Prohibition (Amendment) Bill, 2015, 28 Report, Part I. 31 funds in a fraudulent manner and allow them to escape their liability to the creditors. Therefore, Section 6 limited the application of Section 4 in such cases. 14.8 Section 7 of the 1988 Act repealed Sections 81, 82 and 94 of the Indian Trusts Act, 1882 (2 of 1882); Section 66 of the Code of Civil Procedure, 1908 (5 of 1908.); and Section 281A of   the   Income   Tax   Act,   1961   (43   of   1961).   Section   8 empowered the Central Government to make rules to give effect to the Act. The final section, Section 9, repealed the earlier Ordinance. 14.9 The main thrust of the argument put forth by the Union of India  in  this   appeal  is  that  the  amended   2016   Act  only clarified the 1988 Act. Law Officers appearing for the Union of India trained their guns on the point that the 1988 Act had  already  created  substantial  law for  criminalizing  the offence and the 2016 amendments were merely clarificatory and   procedural,   to   give   effect   to   the   1988   Act.   Such   a submission mandates us to examine the law of the 1988 Act in detail and determine the scope of the earlier regime to 32 understand   as   to   whether   the   2016   amendments   were substantive or procedural. 14.10 Reading Section 2(a) along with Section 3 makes one thing clear – the criminal provision envisaged under the aforesaid provisions does not expressly contemplate  mens rea.  Under the Indian jurisprudence, the law on the subject is fairly well­settled. It has been subjected to the judicial scrutiny of this   Court   on   several   occasions.   It   does   not   call   for   a detailed discussion and is enough to restate the principles. Mens rea   is an essential ingredient of a criminal offence. Doubtless, a statute may exclude the element of  mens rea , but it is a sound rule of construction adopted in England – and   also   accepted   in   India   –   to   construe   a   statutory provision creating an offence in conformity with common law rather than against it, unless the statute expressly or by necessary implication excluded  mens rea . The mere fact that the object of the statute is to promote welfare activities or to eradicate a grave social evil which by itself is not decisive of the question as to whether the element of  a guilty mind is excluded from the ingredients of an offence.   Mens rea   by necessary implication may be excluded from a statute only 33 where it is absolutely clear that implementation of the object of the statute would otherwise be defeated. [refer   Nathulal ,  AIR 1966 SC 43] v. State of Madhya Pradesh 14.11 In the above light, this Court’s first endeavour is to attempt to   interpret   the   law   to   imply   mens   rea .   However,   the language of Section 2(a) coupled with Section 3, completely ignores the aspect of  mens rea , as it intends to criminalize the   very   act   of   one   person   paying   consideration   for acquisition of property for another person. The   mens rea th   aspect   was   specifically   considered   by   the   57 Law Commission Report, and the same was not integrated into the unamended 1988 Act. The observations made in the th 130   Law   Commission   Report   indicate   that   benami transactions are abhorrent when it comes to public wealth and impedes the government from achieving its social goals. This   clearly   allows   us   to   infer   that   the   1988   law   was envisaged on the touchstone of strict liability. 14.12 Such strict statutory formulation under Section 2(a) read with Section 3 had left loose ends in the 1988 Act. In this light, the prosecution would only have to prove only that 34 consideration was paid or consideration was provided by one person for another person and nothing more. In all the judicial   precedents,   this   Court   has   had   the   occasion   to examine this legislation on the civil side and never on the criminal   side,   which   would   bear   a   higher   standards. Conflation of the ingredients under Section 3(1) and (2) with those of Section 4, to forcefully implied  mens rea,  cannot be accepted. 14.13 It may be noted that Supreme Court has dealt with the interpretation of Section 4 of 1988 Act, on several occasions. In  Mithilesh Kumari v. Prem Behari Khare , (1989) 2 SCC 95, this Court was called upon to examine as to whether the aforesaid   provision   has   retrospective   application,   held   as under: “22.  As   defined   in  Section  2( a )  of   the   Act   “ ‘benami transaction’ means any transaction in which property is transferred to one person for a consideration paid or provided by another person”.   A   transaction   must,   therefore,   be benami   irrespective   of   its   date   or   duration. Section   3,   subject   to   the   exceptions,   states that  no  person   shall  enter   into   any   benami transaction.   This   section   obviously   cannot have retrospective operation. However, Section 4 clearly provides that no suit, claim or action to enforce any right in respect of any property 35 held benami against the person in whose name the   property   is   held   or   against   any   other person shall lie, by or on behalf of a person claiming   to   be  real  owner   of   such   property. This naturally relates to past transactions as well. The expression “any property held benami”   is   not   limited   to   any   particular time, date or duration. Once the property is found to have been held benami, no suit, claim   or   action   to   enforce   any   right   in respect   thereof   shall   lie.   Similarly,   sub­ section   (2)   of   Section   4   nullifies   the defences based on any right in respect of any property held benami whether against the person in whose name the property is held   or   against   any   other   person   in   any suit, claim or action by or on behalf of a person   claiming   to   be   the   real   owner   of such property . It means that once a property is found to have been held benami, the real owner   is   bereft   of   any   defence   against   the person in whose name the property is held or any other person.  In other words in its sweep Section   4   envisages   past   benami . In transactions also within its retroactivity this   sense   the   Act   is   both   a   penal   and   a disqualifying statute. In case of a qualifying or disqualifying   statute   it   may   be   necessarily retroactive.   For   example   when   a   Law   of Representation   declares   that   all   who   have attained   18   years   shall   be   eligible   to   vote, those who attained 18 years in the past would be as much eligible as those who attained that age   at   the   moment   of   the   law   coming   into force. When an Act is declaratory in nature the presumption   against   retrospectivity   is   not applicable. Acts of this kind only declare. A statute   in   effect   declaring   the   benami 36 transactions   to   be   unenforceable   belongs   to this   type.   The   presumption   against   taking away vested right will not apply in this case inasmuch as under law it is the benamidar in whose name the property stands, and law only enabled the real owner to recover the property from him which right has now been ceased by the   Act.   In   one   sense   there   was   a   right   to recover or resist in the real owner against the benamidar.  Ubi jus ibi remedium . Where there is a right, there is a remedy. Where the remedy is barred, the right is rendered unenforceable. In this sense it is a disabling statute. All the real   owners   are   equally   affected   by   the disability provision irrespective of the time of creation   of   the   right.   A   right   is   a   legally protected interest. The real owner's right was hitherto protected and the Act has resulted in removal of that protection. 23.  When   the   law   nullifies   the   defences available to the real owner in recovering the benami property from the benamidar the law must   apply   irrespective   of   the   time   of   the benami transactions. The expression “shall lie” in   Section   4(1)   and   “shall   be   allowed”   in Section 4(2) are prospective and shall apply to present (future stages) and future suits, claims or actions only. This leads us to the question whether there was a present suit between the respondent­plaintiff   and   the   defendant­ appellant on the date of the law coming into force. We have noted the dates of filing the suit and   judgments   of   the   courts   below.   On   the date of Section 4 of the Act coming into force, that   is,   19­5­1988   this   appeal   was   pending and, of course, is still pending. Can the suit itself be said to be pending? ( emphasis supplied ) 37 14.14 The aforesaid interpretation was re­examined by this Court in   R. Rajagopal Reddy v. Padmini Chandrasekharan, (1995)   2   SCC   630   and   while   partly   over­ruling   Mitilesh  (supra), it was held as under: Kumari 11.  … Thus it was enacted to efface the then existing right of the real owners of properties held by others benami.  Such an Act was not given   any   retrospective   effect   by   the legislature.   Even when we come to Section 4, it is easy to visualise that sub­section (1) of Section 4 states that no suit, claim or action   to   enforce   any   right   in   respect   of any   property   held   benami   against   the person in whose name the property is held or against any other shall lie by or on behalf of a person claiming to be the real owner of such property.   As per Section 4(1) no such suit   shall   thenceforth   lie   to   recover   the possession of the property held benami by the defendant.   Plaintiff's   right   to   that   effect   is sought   to   be   taken   away   and   any   suit   to enforce   such   a   right   after   coming   into operation   of   Section   4(1)   that   is   19­5­1988, shall not lie.   The legislature in its wisdom has nowhere provided in Section 4(1) that no such suit, claim or action pending on the date when Section 4 came into force shall not be proceeded with and shall stand abated.   On   the   contrary,   clear   legislative intention   is   seen   from   the   words   “no   such claim,   suit   or   action   shall   lie”,   meaning thereby no such suit, claim or action shall be permitted to be filed or entertained or admitted 38 to the portals of any court for seeking such a relief after coming into force of Section 4(1). … The   word   ‘lie’   in   connection   with   the   suit, claim or action is not defined by the Act. If we go   by   the   aforesaid   dictionary   meaning   it would mean that such suit, claim or action to get any property declared benami will not be admitted   on   behalf   of   such   plaintiff   or applicant against the defendant concerned in whose name the property is held on and from the   date   on   which   this   prohibition   against entertaining   of   such   suits   comes   into   force. With respect, the view taken that Section 4(1) would apply even to such pending suits which were already filed and entertained prior to the date   when   the   section   came   into   force   and which   has   the   effect   of   destroying   the   then existing right of plaintiff in connection with the suit property cannot be sustained in the face of the clear language of Section 4(1). It has to be visualised that the legislature in its wisdom has   not   expressly   made   Section   4 retrospective.   Then   to   imply   by   necessary implication   that   Section   4   would   have retrospective effect and would cover pending litigations filed prior to coming into force of the section would amount to taking a view which would run  counter to the  legislative  scheme and intent projected by various provisions of the Act to which we have referred earlier. It is, however, true as held by the Division Bench that on the express language of Section 4(1) any right inhering in the real owner in respect of any property held benami would get effaced once   Section   4(1)   operated,   even   if   such transaction had been entered into prior to the coming   into   operation   of   Section   4(1),   and henceafter Section 4(1) applied no suit can lie in respect to such a past benami transaction. To that extent the section may be retroactive. 39 To   highlight   this   aspect   we   may   take   an illustration. If a benami transaction has taken place in 1980 and a suit is filed in June 1988 by   the   plaintiff   claiming   that   he   is   the   real owner of the property and defendant is merely a benamidar and the consideration has flown from him, then such a suit would not lie on account of the provisions of Section 4(1). Bar against   filing,   entertaining   and   admission   of such   suits   would   have   become   operative   by June   1988   and   to   that   extent   Section   4(1) would   take   in   its   sweep   even   past   benami transactions which are sought to be litigated upon after coming into force of the prohibitory provision of Section 4(1); but that is the only effect of the retroactivity of Section 4(1) and nothing more than that.  From the conclusion that Section 4(1) shall apply even to past benami   transactions   to   the   aforesaid extent, the next step taken by the Division Bench   that   therefore,   the   then   existing rights got destroyed and even though suits by real owners were filed prior to coming into operation of Section 4(1) they would not survive, does not logically follow.  So far as Section 4(2) is concerned, all that 12. is provided is that if a suit is filed by a plaintiff who claims to be the owner of the property under the document in his favour and holds the  property in his  name,  once  Section 4(2) applies,   no   defence   will   be   permitted   or allowed in any such suit, claim or action by or on behalf of a person claiming to be the real owner   of   such   property   held   benami.   The disallowing   of   such   a   defence   which   earlier was   available,   itself   suggests   that   a   new liability   or   restriction   is   imposed   by   Section 40 4(2) on a pre­existing right of the defendant. Such  a  provision  also  cannot   be   said   to  be retrospective   or   retroactive   by   necessary implication.  It is  also pertinent to note  that Section 4(2) does not expressly seek to apply retrospectively. So far as such a suit which is covered   by   the   sweep   of   Section   4(2)   is concerned,   the   prohibition   of   Section   4(1) cannot apply to it as it is not a claim or action filed by the plaintiff to enforce right in respect of any property held benami. On the contrary, it is a suit, claim or action flowing from the sale   deed   or   title   deed   in   the   name   of   the plaintiff. Even though such a suit might have been   filed   prior   to   19­5­1988,   if   before   the stage of filing of defence by the real owner is reached, Section 4(2) becomes operative from 19­5­1988, then such a defence, as laid down by Section 4(2) will not be allowed to such a defendant. However, that would not mean that Section   4(1)   and   Section   4(2)   only   on   that score   can   be   treated   to   be   impliedly retrospective   so   as   to   cover   all   the   pending litigations in connection with enforcement of such rights of real owners who are parties to benami transactions entered into prior to the coming into operation of the Act and specially Section 4 thereof. It is also pertinent to note that Section 4(2) enjoins that no such defence “shall be allowed” in any claim, suit or action by or on behalf of a person claiming to be the real owner of such property. That is to say no such defence shall be allowed for the first time after coming into operation of Section 4(2). If such a defence is already allowed in a pending suit   prior   to   the   coming   into   operation   of Section 4(2), enabling an issue to be raised on such a defence, then the Court is bound to decide the issue arising from such an already allowed defence as at the relevant time when such defence was allowed Section 4(2) was out 41 of the picture. Section 4(2) nowhere uses the words:   “No   defence   based   on   any   right   in respect of any property held benami whether against the person in whose name the property is held or against any other person, shall be allowed to be raised or continued to be raised in   any   suit.”   With   respect,   it   was   wrongly assumed by the Division Bench that such an already   allowed   defence   in   a   pending   suit would   also   get   destroyed   after   coming   into operation of Section 4(2). We may at this stage refer   to   one   difficulty   projected   by   learned advocate   for   the   respondents   in   his   written submissions,   on   the   applicability   of   Section 4(2). These submissions read as under: …

42

14.15 Returning to the discussion at hand, there is no doubt that the unamended 1988 Act tried to create a strict liability offence and allowed separate acquisition of benami property. This begs the question whether such a criminal provision, which the State now intends to make use of, in order to confiscate properties after 28 years of dormancy, could have existed   in   the   books   of   law.   Other   than   the   abuse   and unfairness such exercise intends to bring about, there is a larger constitutional question about existence of such strict provisions without adequate safeguards. 43 15.   S UBSTANTIVE   DUE   PROCESS ,   M ANIFEST   ARBITRARINESS   AND     PROVISIONS   UNDER  1988 A CT   . 15.1 The simple question addressed by the counsel appearing for both sides is whether the amended 2016 Act is retroactive or prospective. Answering the above question is inevitably tied to an intermediate question as to whether the 1988 Act was   constitutional   in   the   first   place.   The   arguments addressed by the Union of India hinges on the fact that the 1988 Act was a valid substantive law, which required only some   gap   filling   through   the   2016   Act,   to   ensure   that sufficient   procedural   safeguards   and   mechanisms   are present to enforce the law. According, to the Union of India, the 2016 Act was a mere gap filling exercise. 15.2 However, upon studying the provisions of the 1988 Act, we find that there are questions of legality and constitutionality which arise with respect to Sections 3 and 5 of 1988 Act. The answers to such questions cannot be assumed in favour of   constitutionality,   simply   because   the   same   was   never questioned before the Court of law. We are clarifying that we are not speaking of the presumption of constitutionality as a matter of burden of proof. Rather, we are indicating the assumption taken by the Union as to the validity of these 44 provisions in the present litigation. Such assumption cannot be made when this Court is called upon to answer whether the impugned provisions are attracted to those transactions that have taken place before 2016. 15.3 Indian jurisprudence has matured through years of judicial tempering, and the country has grown to be a jurisdiction having   ‘substantive   due   process’.   A   brief   sketch   of   the jurisprudential journey thus far, may be necessary to aid our understanding.   15.4 There is no gain saying that deletion of the phrase ‘due process of law’ from the draft Constitution was inspired by the   views   of   James   Bradley   Thayer   and   Justice   Felix Frankfurter,   who   held   that   concentration   of   power   to examine reasonability of a legislation through judicial review would fall foul of separation of powers and denigration of parliamentary   sovereignty.  Dr.   Ambedkar  himself   did   not want   to   side   with   any   of   the   above   opinions,   rather   he envisaged   the   situation   as   one   who   is   caught   between Charybdis and Scylla.  45 15.5 The emphasis on the aforesaid deletion by the majority in A.K Gopalan v. State of Madras , AIR 1950 SC 27, was somewhat drawn back by the celebrated dissent of Fazal Ali, J., wherein the term “Procedure established by law” was interpreted to mean “Procedural due process”. This judicial quibbling was ultimately set to rest in  Maneka Gandhi v. , (1978) 1 SCC 248, wherein a combined Union of India reading of Articles 14, 19 and 21 would make it clear that the judiciary, so to say, always had the forensic power to examine reasonability of a law, both procedural as well as substantive.   Later   expositions   have   only   given   colour   to expand what was implicit under the three golden Articles of Part III. In  Sunil Batra v. Delhi Administration , (1978) 4 SCC 494, the word law as occurring under Article 21 was interpreted   to   mean   jus   and   not   merely   lex .   It   may   be necessary to quote the observation of the majority in the aforesaid case in the following manner:  “228…The   word   “law”   in   the   expression “procedure established by law” in Article 21 has been interpreted to mean in   Maneka Gandhi case that the law must be right, just and fair and not arbitrary, fanciful or oppressive .” ( Emphasis supplied ) 46 15.6 Without   burdening   this   judgment   with   a   series   of precedents laid down by this Court, we may refer only to the majority   opinion   in   K.   Puttaswamy   v.   Union   of   India , (2017) 10 SCC 1, wherein the law has been settled by a Nine­Judge Bench of this Court in the following manner:   The   Court,   in  the  exercise   of  its “294. power of judicial review, is unquestionably vested   with   the   constitutional   power   to adjudicate upon the validity of a law. When the validity of a law is questioned on the ground   that   it   violates   a   guarantee contained   in   Article   21,   the   scope   of   the challenge is not confined only to whether the procedure for the deprivation of life or personal liberty is fair, just and reasonable. Substantive   challenges   to   the   validity   of laws encroaching upon the right to life or personal  liberty  has  been  considered  and dealt with in varying contexts, such as the death   penalty   (  [ Bachan   Singh Bachan  v.  , (1980) 2 SCC 684 : Singh State of Punjab 1980 SCC (Cri) 580] ) and mandatory death sentence   (  [  v.  , Mithu Mithu State   of   Punjab (1983) 2 SCC 277 : 1983 SCC (Cri) 405] ), among   other   cases.   A   person   cannot   be deprived of life or personal liberty except in accordance with the procedure established by law. Article 14, as a guarantee against arbitrariness, infuses the entirety of Article 21.   The   interrelationship   between   the guarantee   against   arbitrariness   and   the protection   of   life   and   personal   liberty operates in a multi­faceted plane. First, it 47 ensures that the procedure for deprivation must be fair, just and reasonable. Second, Article 14 impacts both the procedure and the   expression   “law”.   A   law   within   the meaning of Article 21 must be consistent with the norms of fairness which originate in Article 14. As a matter of principle, once Article 14 has a connect with Article 21, norms   of   fairness   and   reasonableness would apply not only to the procedure but to the law as well. 295.  Above   all,   it   must   be   recognised that judicial review is a powerful guarantee against   legislative   encroachments   on   life and   personal   liberty.   To   cede   this   right would   dilute   the   importance   of   the protection   granted   to   life   and   personal liberty   by   the   Constitution.   Hence,   while judicial review in constitutional challenges to the validity of legislation is exercised with a conscious regard for the presumption of constitutionality and for the separation of powers   between   the   legislative,   executive and judicial institutions, the constitutional power which is vested in the Court must be retained as a vibrant means of protecting the lives and freedoms of individuals.  The danger of construing this as an 296. exercise of “substantive due process” is that it results in the incorporation of a concept from the American Constitution which was consciously   not   accepted   when   the Constitution was framed. Moreover, even in the country of its origin, substantive due process   has   led   to   vagaries   of   judicial interpretation. Particularly having regard to 48 the constitutional history surrounding the deletion of that phrase in our Constitution, it   would   be   inappropriate   to   equate   the jurisdiction   of   a   constitutional   court   in India to entertain a substantive challenge to the validity of a law with the exercise of substantive   due   process   under   the   US Constitution. Reference to substantive due process   in   some   of   the   judgments   is essentially   a   reference   to   a   substantive challenge   to   the   validity   of   a   law   on   the ground   that   its   substantive   (as   distinct from   procedural)   provisions   violate   the Constitution.” 15.7 The law with respect to testing the unconstitutionality of a statutory instrument can be summarized as under: a. Constitutional   Courts   can   test   constitutionality   of legislative   instruments   (statute   and   delegated legislations); b. The Courts are empowered to test both on procedure as well as substantive nature of these instruments. c. The   test   should   be   based   on   a   combined   reading   of Articles 14, 19 and 21 of the Constitution. 15.8 One   of   the   offshoots   of   this   test   under   Part   III   of   the Constitution is the development of the doctrine of manifest arbitrariness. A doctrinal study of the development of this area   may   not   be   warranted   herein.   It   is   well   traced   in 49 Shayara Bano v. Union of India , (2017) 9 SCC 1. We may only state that the development of jurisprudence has come full circle from an overly formalistic test of classification to include   the   test   of   manifest   arbitrariness.   A   broad formulation of the test was noted in the aforesaid case as under:

50

( emphasis supplied )

Court was concerned with the constitutionality of Section 497 of the IPC relating to the provision of adultery. While declaring the aforesaid provision as unconstitutional on the aspect of it being manifestly arbitrary, this Court reiterated the test as under: “...The   test   of   manifest   arbitrariness, therefore,   as   laid   down   in   the   aforesaid judgments   would   apply   to   invalidate legislation   as   well   as   subordinate legislation   Under   Article   14.   Manifest arbitrariness,   therefore,   must   be something   done   by   the   legislature capriciously,   irrationally   and/or without   adequate   determining principle. Also, when something is done which   is   excessive   and disproportionate, such legislation would   be   manifestly   arbitrary   .  We   are, therefore, of the view that arbitrariness in the   sense   of   manifest   arbitrariness   as pointed out by us above would apply to negate   legislation   as   well   Under   Article 14.” ( ) emphasis supplied

(2020) 17 SCC 324, this Court struck down Section 87 of 51 the Arbitration Act on the ground of manifest arbitrariness as   the   Parliament   chose   to   ignore   the   judgment   of   this Court, without removing the basis of the same or identifying a principle for militating against the same. 15.11 Coming back to the 1988 Act, the two provisions with which we are concerned are Sections 3 and 5 of 1988 Act. They are required to be separately analysed herein. At the outset, we may notice that the enactment was merely a shell, lacking the substance that a criminal legislation requires for being sustained. The reasons for the same are enumerated in the following paragraphs.  15.12 First, the absence of   mens rea   creates a harsh provision having strict liability. Such an approach was frowned upon th by   the   57   Law   Commission   Report   as   concerns   of   tax evasion or sham transactions in order to avoid payment to creditors   were   adequately   addressed   by   the   existing th provisions of law. Even the 130   Law Commission Report did not expressly rule out the inclusion of   mens rea . The legislative move to ignore earlier Law Commission Reports without there being a principle identified to do away with the aspect of   mens rea   should be a contributory factor in 52 analysing   the   constitutionality   of   the   aforesaid   criminal provision under the 1988 Act.   15.13 Further, under the amended 2016 Act, the aspect of  mens rea , is brought back through Section 53. Such resurrection clearly indicates that doing away of the   mens rea   aspect, was without any rhyme or reason, and ended up creating an unusually harsh enactment. 15.14 Second,   ignoring   the   essential   ingredient   of   beneficial ownership   exercised   by   the   real   owner   contributes   to making the law even more stringent and disproportionate with respect to benami transactions that are tripartite in nature.   The   Court   cannot   forcefully   read   the   ingredients developed   through   judicial   pronouncements   or   under Section   4   (having   civil   consequence)   into   the   definition provided   under   Sections   2   and   3   (espousing   criminal consequences),   to   save   the   enactment   from unconstitutionality.   Such   a   reading   would   violate   the express language of Section 2(a), of excluding one ingredient from the definition of ‘benami transaction’, and would suffer from the vice of judicial transgression. In removing such an essential   ingredient,   the   legislature   did   not   identify   any 53 reason   or   principle,   which   made   the   entire   provision   of Section   3   susceptible   to   arbitrariness.   Interestingly,   for tripartite  benami  transactions,  the  2016 Act brings back this ingredient through Section 2(9)(A)(b). In this context, we may state that it is a simple requirement under Article 20(1) that a law needs to be clear and not vague. It should not have incurable gaps which are yet to be legislated/filled in by judicial process.  15.15 Third, it is fairly admitted by the learned ASG, Mr. Vikramjit Banerjee appearing for the Union of India, that the criminal provision   was   never   utilized   as   there   was   a   significant hiatus in enabling the functioning of such a provision.  15.16 Fourth, reading Section 2(a) with Section 3(1) would have created overly broad laws susceptible to be challenged on the grounds of manifest arbitrariness. If this Court reads criminal provisions of the  Benami Act to have  had force since   1988,   then   the   following   deleterious   consequences would ensue: (i.) Section 187C of the Companies Act, 1956 assured protection   to   nominal   and   beneficial   holding   of 54 shares if the prescribed declaration duly made are at serious risk. (ii.) Benami cooking gas connections which have been regularized from time to time are at risk. (iii.) Housing   colonies   and   benami   allotments   of   DDA flats which have been regularised from time to time are at risk. 15.17 The criminal provision under Section 3(1) of the 1988 Act has serious lacunae which could not have been cured by judicial   forums,   even   through   some   form   of   harmonious interpretation.   A  conclusion  contrary   to  the  above   would make the aforesaid law suspect to being overly oppressive, fanciful   and   manifestly   arbitrary,   thereby   violating   the ‘substantive due process’ requirement of the Constitution.  15.18 Coming to Section 5 of the 1988 Act, it must be noted that the acquisition proceedings contemplated under the earlier Act were   in rem   proceedings against benami property. We may note that, jurisprudentially, such   in rem   proceedings transfer the guilt from the person who utilized a property which is a general harm to the society, to the property itself.   55 15.19 When such proceedings are contemplated under law, there need to be adequate safeguards built into the provisions, without which the law would be susceptible to challenge under Article 14 of the Constitution. Coming to Section 5 of the 1988 Act, it was conceived as a half­baked provision which did not provide the following and rather left the same to be prescribed through a delegated legislation: (i) Whether   the   proceedings   under   Section   5   were independent or dependant on successful prosecution? (ii) The   standard   of   proof   required   to   establish   benami transaction in terms of Section 5. (iii) Mechanism for providing opportunity for a person to establish his defence. (iv) No ‘defence of innocent owner’ was provided to save legitimate innocent buyers. (v) No adjudicatory mechanism was provided for. (vi) No   provision   was   included   to   determine   vesting   of acquired property. (vii) No provision to identify or trace benami properties. (viii) Condemnation of property cannot include the power of tracing, which needs an express provision. 56 Such   delegation   of   power   to   the   Authority   was   squarely excessive and arbitrary as it stood. From the aforesaid, the Union’s stand  that the  2016  Act was  merely procedural, cannot stand scrutiny. 15.20 In   any   case,   such   an   inconclusive   law,   which   left   the essential features to be prescribed through delegation, can never be countenanced in law to be valid under Part III of the Constitution. The gaps left in the 1988 Act were not merely   procedural,   rather   the   same   were   essential   and substantive. In the absence of such substantive provisions, the omissions create a law which is fanciful and oppressive at   the   same   time.   Such   an   overbroad   provision   was manifestly arbitrary as the open texture of the law did not have sufficient safeguards to be proportionate. 15.21 At this stage, we may only note that when a Court declares a law as unconstitutional, the effect of the same is that such a declaration would render the law not to exist in the law books   since   its   inception.   It   is   only   a   limited   exception under Constitutional law, or when substantial actions have been   undertaken   under   such   unconstitutional   laws   that going   back   to   the   original   position   would   be   next   to 57 impossible.   In   those   cases   alone,   would   this   Court   take recourse to the concept of ‘prospective overruling’.  15.22 From the above, Section 3 (criminal provision) read with Section 2(a) and Section 5 (confiscation proceedings) of the 1988 Act are overly broad, disproportionately harsh, and operate   without   adequate   safeguards   in   place.   Such provisions were still­born law and never utilized in the first place. In this light, this Court finds that Sections 3 and 5 of the 1988 Act were unconstitutional from their inception. 15.23 Having   said   so,   we   make   it   abundantly   clear   that   the aforesaid discussion does not affect the civil consequences contemplated under Section 4 of the 1988 Act, or any other provisions. 16. 2016 A   CT   AND  I TS   ANALYSIS   16.1 The   next  subject  of   examination   is   the   2016   Act,   which amends the 1988 Act, and expanded the 1988 Act to 72 sections (from 9 sections), divided into 8 chapters. At the outset, we need to understand the general scheme of the law.   The   definition   of   benami   transactions,   which   is   the heart   of   the   entire   1988   Act,   has   undergone   a metamorphosis and stands as under: 58 [D EFINITIONS . Section 2(9)  "benami transaction" means: (A) a transaction or an arrangement­      (a) where a property is transferred to, or   is   held   by,   a   person,   and   the consideration for such property has been provided, or paid by, another person; and         (b)   the   property   is   held   for   the immediate   or   future   benefit,   direct   or indirect, of the person who has provided the consideration,  except when the property is held by­         (i) a Karta, or a member of a Hindu undivided family, as the case may be, and the   property   is   held   for   his   benefit   or benefit   of   other   members   in   the   family and the consideration for such property has   been   provided   or   paid   out   of   the known   sources   of   the   Hindu   undivided family;         (ii) a person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity and includes a trustee, executor, partner, director of a company, a depository or a participant as  an  agent of  a depository under the Depositories Act, 1996 (22 of 1996) and any other person as may be notified   by   the   Central   Government   for this purpose;         (iii) any person being an individual in the name of his spouse or in the name of any child of such individual and the consideration for such property has been 59 provided   or   paid   out   of   the   known sources of the individual;          (iv) any person in the name of his brother or sister or lineal ascendant or descendant, where the names of brother or   sister   or   lineal   ascendant   or descendant and the individual appear as joint­owners   in   any   document,   and   the consideration for such property has been provided   or   paid   out   of   the   known sources of the individual; or (B) a transaction or an arrangement in respect of a property carried out or made in a fictitious name; or (C) a transaction or an arrangement in respect of a property where the owner of the property is not aware of, or, denies knowledge of, such ownership; (D) a transaction or an arrangement in respect  of  a  property  where  the  person providing   the   consideration   is   not traceable or is fictitious; Explanation . ­ For the removal of doubts, it   is   hereby   declared   that   benami transaction   shall   not   include   any transaction   involving   the   allowing   of possession of any property to be taken or retained in part performance of a contract referred to in section 53A of the Transfer of Property Act, 1882, if, under any law for the time being in force,­ (i)   consideration   for   such   property   has been   provided   by   the   person   to   whom possession of property has been allowed but   the   person   who   has   granted 60 possession   thereof   continues   to   hold ownership of such property; (ii)   stamp   duty   on   such   transaction   or arrangement has been paid; and (iii) the contract has been registered. 16.2 Major changes envisaged under the definition are as under: (i) Expansion   of   the   definition   from   arm’s   length transactions contemplated under the 1988 Act, to arrangements and schemes. (ii) Additional   ingredient   of   benefits   flowing   to   the real owner, a lacuna pointed in the earlier part, under 1988 Act, is included in terms of Section 2(9)(A)(b). (iii) Expansion of the ambit through Section 2(9)(C), to   those   properties   where   benamidar   denies knowledge of such ownership. (iv) Expansion of the ambit through Section 2(9)(D), wherein the person providing the consideration is not traceable or is fictitious. (v) Expansion   from   recognition   of   only   tripartite transactions   under   1988   Act,   to   also   include bipartite transactions. 61 16.3 Section   2(26)   of   the   2016   Act   defines   a   property.   This definition has been expanded to include proceeds from the property   as   well.   Such   expansion   allows   for   tracing   of proceeds and is a substantial change as compared to the 1988 Act. Along with this, benami property has been defined under   Section   2(8).   Benamidar   is   defined   under   Section 2(10). 16.4       Chapter   2   contains   four   provisions   which   are   modified provisions   of   the   1988   Act.   Section   3   now   bifurcates offences   into   two   separate   categories   based   on   the   time period   of   the   benami   transaction.   Under   Section   3(2), punishment of three years is mandated for those who have entered   into   benami   transactions   from   05.09.1988   to 31.10.2016.   Section   3(3)   applies   to   those   benami transactions   which   have   been   entered   into   after commencement   of   the   amended   2016   Act   and   the punishment for the aforesaid is prescribed under Section 53 of Chapter VII. It may be noted that under Section 3(3), the punishment is increased from three years to a maximum of seven years and a fine may be imposed which extend up to 25% of the fair market value of the property. This distinction 62 between Section 3(2) and 3(3) read with Section 53, contains the element of  mens rea . 16.5       Section 4 remains the same as under the 1988 Act, barring the   fact   that   Section   4(3)   has   integrated   the   exceptions provided   under   the   definition   of   benami   transaction   in terms of Section 2(9). The civil consequences provided under Section 4 continue to apply even post the 2016 Act. The interpretation of the aforesaid section, as given in the   R.    (supra), continues to apply. Rajagopal Reddy Case 16.6 Section   5   on   the   other   hand   has   been   modified   and   it presently stands as under:

16.7 Chapter III relates to the administrative mechanism of the authorities   required   for   implementation   of   the   2016   Act. Chapter   IV   relates   to   attachment,   adjudication,   and confiscation of benami property. These provisions relate to forfeiture, which need to be analysed hereinafter. 63 16.8 Section  24(1) states  that,  if  the  initiating  Officer,  on the basis of gathered material, having reason to believe, that a particular property is a benami property, then he ought to 7 issue notice  to the beneficial owner (if identified) as well as to the ostensible owner (if any) seeking an explanation as to why the property should not be treated as Benami.  16.9 The   2016   Act   provides   for   provisional   attachment   of   the property where the concerned officer has genuine reason to believe, based on the material gathered, that the person in possession of the property held in benami may alienate the property.   Such   provisional   attachment   cannot   be   taken recourse to every time. Recourse under Section 24(3) of the 2016 Act should be exercised in exceptional circumstance after previous approval of Approving Authority. Such interim provisional attachment is strictly limited by time. 16.10 Adjudication under Section 24(4) is mandatory and requires the authority to examine the same on a   prima facie   basis. Such adjudication must take place after providing collected material to the accused, along with the show cause notice. A reasoned order is mandated under the aforesaid provision. 7 In terms of Section 25 of the 2016 Act. 64 The Officer is mandated to present a statement of case to the   adjudicating   officer,   in  terms   of   Section  24(5)  of   the 2016 Act. 16.11 Adjudication   under   Section   26   mandates   notice   and disclosure   obligation   to   various   other   persons.   The adjudicating authority can either pass an order in terms of Section   26(3)(c)(i)   or   (ii),   or   pass   an   order   for   further inquiries in terms of Section 26(3)(b). 16.12 Section 27(1) relates to confiscation of property, wherein if a property is adjudicated as a benami property under Section 26(3),   then   the   adjudicating   authority   can   give   an opportunity to the concerned persons, and after hearing the parties,   pass   an   order   confiscating   the   property.   The aforesaid confiscation order is subject to the order passed by   the   Appellate   Tribunal   under   Section   46.   Order   of confiscation vests such property absolutely in the Central Government,   free   from   all   encumbrances   and   no compensation   shall   be   payable   in   respect   of   such confiscation. 16.13 Section 27(4) provides that in the interregnum of initiating confiscation proceedings, any third­party rights created to 65 defeat the purpose of the Act shall be null and void. Sub clause 5 mandates that if no order of confiscation is made and the same has attained finality, no claim can be made against the Government for the process. 16.14 Section 28 mandates appointment of an Administrator by the Central Government to manage the property. Such an Administrator shall have the power to take possession of such   a   property   upon   order   of   confiscation,   in   terms   of Section 29. 16.15 Chapters V and VI delineate the powers of the Appellate Tribunal as well as Special Courts. Chapter VII consists of offences and penalties. Specifically, we may refer to Section 53: 53. Penalty for Benami Transaction   (1)   Where   any   person   enters   into   a benami transaction in order to defeat the provisions of any law or to avoid payment of statutory dues or to avoid payment to creditors, the beneficial owner, benamidar and   any   other   person   who   abets   or induces   any   person   to   enter   into   the benami transaction, shall be guilty of the offence of Benami transaction.  (2) Whoever is found guilty of the offence of benami transaction referred to in sub­ section   (1)   shall   be   punishable   with rigorous   imprisonment   for  a  term  which 66 shall not be less than one year, but which may extend to seven years and shall also be   liable   to   fine   which   may   extend   to twenty­five   per   cent.   of   the   fair   market value of the property. Interestingly, a crime which attracted strict liability under the 1988 Act, is modified to include a   mens rea   aspect in th th terms of the recommendations of the 57   and 130   Law Commission Reports.  16.16 It may be necessary to note that no prosecution can be initiated   without   previous   sanction   of   the   competent authority   as   provided   under   Section   55,   which   reads   as under: 55. No prosecution shall be instituted against any   person   in   respect   of   any   offence   under sections   3,   53   or   section   54   without   the previous sanction of the Board. 16.17 Perusal of the remaining provisions is not required for the purpose at hand. 17.W   HETHER  S ECTION  3(1)  AND  C HAPTER  IV  READ   WITH  S ECTION  5  OF   THE CT HAVE RETROACTIVE EFFECT    2016 A       ?   17.1 The thrust of the arguments advanced by the Union of India can be crystallized as under: 67 (i.) That   the   1988   Act   was   a   valid   enactment   with procedural gaps that were filled retrospectively by the 2016 amendment. (ii.) That   the   provision   of   confiscation   (civil   forfeiture) under the 1988 Act, being in the domain of civil law, is not punitive and therefore, the prohibition under Article 20(1) of the Constitution is not attracted in this case.   17.2 With respect to the first line of argument, our discussion above can be summarized as under: (a.) Section 3(1) of 1988 Act is vague and arbitrary. (b.) Section   3(1)   created   an   unduly   harsh   law   against settled   principles   and   Law   Commission recommendations. (c.) Section 5 of 1988 Act, the provision relating to civil forfeiture, was manifestly arbitrary. (d.) Both provisions were unworkable and as a matter of fact, were never implemented. 17.3       Having arrived at the aforesaid conclusions that Sections 3 and 5 were unconstitutional under the 1988 Act, it would mean that the 2016 amendments were, in effect, creating 68 new provisions and new offences. Therefore, there was no question of retroactive application of the 2016 Act. As for the offence under Section 3(1) for those transactions that were entered into between 05.09.1988 to 31.10.2016, the law   cannot   retroactively   invigorate   a   stillborn   criminal offence, as established above. 17.4       As per the concession made by the Union of India and a fair reading of Section 53 of the 2016 Act, the offence under the aforesaid provision is prospective, and only applied to those transactions that were entered into after the amendment came into force,  , 1.11.2016. Any contrary interpretation viz. of Section 3 of the 1988 Act would be violative of Article 20(1) of the Constitution. Article 20(1) reads as under: 20. Protection in respect of conviction for offences (1) No person shall be convicted of any offence except for violation of the law in force at the time of the commission of the act charged as an   offence,   nor   be   subjected   to   a   penalty greater   than   that   which   might   have   been inflicted under the law in force at the time of the commission of the offence. 17.5 In ,  (1983) 1 SCC 177,   this Court  T. Barai v. Henry Ah Hoe has expounded Article 20 (1) in the following manner: 69 “22.  It is only retroactive criminal legislation that   is   prohibited   under   Article   20(1).   The prohibition contained in Article 20(1) is that no person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence prohibits nor shall he be subjected to a penalty greater   than   that   which   might   have   been inflicted under the law in force at the time of the commission of the offence. It is quite clear that   insofar   as   the   Central   Amendment   Act creates new offences or enhances punishment for a particular type of offence no person can be convicted by such ex post facto law nor can the enhanced punishment prescribed by the amendment be applicable. But insofar as the Central   Amendment   Act   reduces   the punishment for an offence punishable under Section 16(1)( a ) of the Act, there is no reason why the accused should not have the benefit of such   reduced   punishment.   The   rule   of beneficial construction requires that even ex post facto law of such a type should be applied to mitigate the rigour of the law. The principle is based both on sound reason and common sense.   This   finds   support   in   the   following passage from  Craies on Statute Law , 7th Edn., at pp. 388­89: “A retrospective statute is different from an ex   post   facto   statute.   “Every   ex   post   facto law…” said Chase, J., in the American case of  Calder  v.  Bull  [3 US (3 Dall) 386: 1 L Ed 648 (1798)] “must necessarily be retrospective, but every retrospective law is not an ex post facto law.   Every   law   that   takes   away   or   impairs rights   vested   agreeably   to   existing   laws   is retrospective, and is generally unjust and may be oppressive; it is a good general rule that a law should have no retrospect, but in cases in which the laws may justly and for the benefit of the community and also of individuals relate 70 to a time antecedent to their commencement: as statutes of oblivion or of pardon. They are certainly   retrospective,   and   literally   both concerning   and   after   the   facts   committed. But  I  do not  consider any law  ex  post  facto within the prohibition that mollifies the rigour of the criminal law ,  but only those that create   or   aggravate   the   crime   ,   or   increase   the punishment   or   change   the   rules   of evidence   for   the   purpose   of .  There   is   a  great   and   apparent conviction... difference   between   making   an   unlawful   act lawful   and   the   making   an   innocent   action criminal and punishing it as a crime.” 17.6 In the case at hand, the 2016 Act containing the criminal provisions is applicable only prospectively, as the relevant Sections   of   the   pre­amendment   1988   Act   containing   the penal   provision,   have   been   declared   as   unconstitutional. Therefore, the question of construction of the 2016 Act as retroactive  qua  the penal provisions under Sections 3 or 53, does not arise.  17.7 The continued presence of an unconstitutional law on the statute book, or the claim that such law was not challenged before Constitutional Courts, does not prevent this Court from holding that such unconstitutional laws cannot enure to the benefit of or be utilized to retroactively amend laws to cure   existing   constitutional   defects.   If   such   curing   is 71 allowed,   then   Article   20(1)   of   the   Constitution   would   be rendered nugatory. 17.8 This brings us to the last aspect as to the retroactive operation of confiscation (forfeiture) under Section 5 read with Chapter IV of the 2016 Act. It is the argument of the Union of India that civil forfeiture being in the domain of civil law is not punitive   in   nature.   Therefore,   it   does   not   attract   the prohibition   contained   under   Article   20(1)   of   the Constitution. Meaning thereby, that if this Court holds that the civil forfeiture prescribed under the 2016 Act is punitive, only then will the prohibition under Article 20(1) apply. If not, then the prohibition does not apply. 17.9 Although   we   have   held   that   Section   5   of   the   1988   Act   was unconstitutional   for   being   manifestly   arbitrary,   however such holding is of no consequence if this Court comes to the conclusion that confiscation under Section 5 of 2016 Act read   with   Chapter   IV,   was   civil   in   nature   and   is   not punitive. 17.10 It is well settled that  the legislature has  power  to  enact retroactive/retrospective   civil   legislations   under   the Constitution. However, Article 20(1) mandates that no law 72 mandating   a   punitive   provision   can   be   enacted retrospectively.   Further,   a   punitive   provision   cannot   be couched as a civil provision to by­pass the mandate under Article 20(1) of the Constitution which follows the settled legal principle that “ what cannot be done directly, cannot be done indirectly ”. 17.11 Therefore,   the   immediate   question   which   arises   for consideration   is   whether   the   retroactive   confiscation provided under Section 5 read with Chapter IV of 2016 Act is punitive or not? 17.12 At the outset, we may note that Shri S. V. Raju, learned ASG, has submitted that acquisition provided under Section 5 of the 1988 Act is same as confiscation provided under Section 5 read with Chapter IV of the 2016 Act. He states that   both   concepts   are   related   to   civil   law   and   is   not concerned with punitive punishments as provided under the Indian Penal Code, 1860. 17.13 Acquisition   under   the   earlier   1988   Act   as   well   as confiscation   under   the   2016   Act   are   said   to   have   been enacted on the reasoning that the property emanating from the benami transaction also gets tainted. The substantive 73 difference   between   the   acquisition   provision   under   the earlier enactment and the confiscation provision under the 2016 Act is that proceeds of benami transactions have been made traceable under the 2016 Act. 17.14 Before we analyse the other provisions, it is necessary to give a brief introduction to the concept of civil forfeiture in India, as the same was argued by the learned ASG. Under Admiralty jurisdiction, the concerned Admiralty Courts had the jurisdiction to forfeit vessels under its civil jurisdiction in lieu   of  any   maritime  claim.  Same  was   the  law  across various   common   law   jurisdictions,   such   as   the   United States of America and the United Kingdom. 17.15 Forfeiture occurs in various types, few of which are found in India. Broadly, forfeitures can be categorized as civil and criminal.   On   the   civil   side,   there   can   be   in   rem   or   in personam  forfeitures .  Punitive forfeitures under the criminal law are  in personam . Criminal forfeitures usually take place at the conclusion of a trial, when the guilt of the accused is established.   Standards   of   evidentiary   requirement   differ greatly between civil and criminal forfeiture. 74 17.16 The historic origin of  in rem  civil forfeiture in common law jurisdictions was earlier mostly restricted to trans­national crimes. These early laws mandated that the property was subject to forfeiture because it was the instrument by which the   offence   was   committed,   and   it   was   necessary   to confiscate   such   property   to   remove   it   from   circulation. However, the Twentieth century saw expansion of forfeiture laws into a wide array of crimes. The modern forfeiture laws not only allow forfeiture of property used to facilitate the crime, but cover the proceeds of the offence as well. In the Supreme   Court   of   the   United   States,   constitutional challenges   laid   to   such   civil   forfeiture   laws   have   been dismissed   as   they   were   usually   attributed   to   historic prevalence of such forfeiture laws. However, such historic reasons of its existence cannot justify continued expansion of   civil   forfeiture   laws,   as   has   been   observed   by   Justice Clarence Thomas in the following manner:  “This   system—where   police   can   seize property   with   limited   judicial   oversight   and retain   it   for   their   own   use—has   led   to egregious   and   well­chronicled   abuses,”   and “These  forfeiture  operations   frequently   target 75 the poor and other groups least able to defend 8 their interests in forfeiture proceedings”. 17.17 In the case at hand, although expansion of forfeiture laws originates from the Parliament’s concern for decriminalizing property   holdings,   however,   we   are   reminded   of   Justice Oliver Wendell Holmes, who has stated as under: “The customs beliefs or needs of a primitive time establish a rule or a formula. In the course of centuries, the custom, belief, or necessity disappears, but the rule remains. The reason which gave rise to the rule has been   forgotten,   and   ingenious   minds   set themselves   to   enquire   how   it   is   to   be accounted   for.   Some   ground   of   policy   is thought of, which seems to explain it and to reconcile it with the present state of things; and then the rule adapts itself to the new reasons which have been found for it, and enters   on   a   new   career.   The   old   form receives a new content and in time even the form   modifies   itself   to   for   the   meaning 9 which it has received.” 17.18 While   categorizing   the   forfeiture   proceedings   as   civil   or criminal,   the   test   laid   down   by   the   European   Court   of Human Rights in  , [1976] 1 Engel v The Netherlands (No.1) EHRR   647,   have   been   treated   as   giving   authoritative guidance. Those tests are set out in paragraphs 80 to 82 of the Report and are as follows:  8 Leonard v. Texas , 137 S. Ct. 847, 847-48 (2017). 9 Oliver Wendell Holmes in The Common Law 5 (1881). 76 "(i) The manner in which the domestic state classifies   the   proceedings.   This   normally carries   comparatively   little   weight   and   is regarded   as   a   starting   point   rather   than determinative ­­ see Ozturk v Germany [1984] 6 EHRR 409 at 421 and 422.  (ii)   The   nature   of   the   conduct   in   question classified objectively bearing in mind the object and purpose of the Convention.  (iii)   The severity of any possible penalty ­­ severe   penalties,   including   those   with imprisonment   in   default   and   penalties intended   to   deter   are   pointers   towards   a criminal classification of proceedings ­­ see Schmautzer v Austria [1995] 21 EHRR 511.  In Lauko v Slovakia [1998] ECHR 26138/95 the   court   observed   that   these   criteria   were alternatives   and   not   cumulative   although   a cumulative approach might be adopted where a separate analysis of each criterion did not make it possible to reach a clear conclusion as to the existence of a 'criminal charge'."  ( emphasis supplied ) The aforesaid proposition has also been confirmed by the House of Lords in  , [2003] 1 ALL ER 497. R v. H 17.19 In  ,  372 US 144 (1963), the Kennedy v Mendoza­Martinez Supreme Court of the United States, while concerned with the constitutionality of legislation that imposed forfeiture of citizenship on those who had left or remained outside the United States during wartime to evade military service, had 77 laid down the following relevant factors to classify forfeiture law: (a)   Whether   the   sanction   involves   an   affirmative disability or restraint;  (b)   Whether it has been historically regarded as a punishment;  (c)   Whether it is only applicable where there has been a finding of scienter (that is, a finding that an act has been done knowingly and intentionally);  (d) Whether its operation promotes the traditional retributive and deterrent aims of punishment; (e)   Whether   the   behaviour   to   which   the   statute applies is already a crime;  (f)  Whether an alternative purpose to which it may be rationally connected is attributable to it; and  (g)   Whether   it   appears   excessive   in   light   of   the alternative purpose assigned.  17.20 Coming to the Indian case laws, in  State of West Bengal v. S. K. Gosh , AIR 1963 SC 255, this Court was concerned with the Criminal Law Amendment Ordinance 38 of 1944, wherein   the   law   provided   only   for   attachment   of   the property,   after   conviction   is   given   effect   to.   Unlike   the present   law,   the   taint   on   the   property   is   squarely determined   by   the   Criminal   Court   deciding   the   criminal 78 conviction. Confiscation contemplated under Section 13 of the Criminal Law Amendment Ordinance 38 of 1944 could only be given effect to after the verdict of guilty by Criminal Court. In the  light of  such  unique  provisions, the  Court characterized such forfeiture laws as civil in nature. We may note that such a law did not contemplate an independent confiscation proceeding as created under this law, rather, a mechanism   was   devised   to   confiscate   a   property   after criminal conviction. 17.21 This Court, while noting that forfeiture is no doubt punitive under Article 20(1) of the Constitution as it is one of the punishments prescribed under Section 53 of IPC, held that Section 13(3) of the Criminal Law Amendment Ordinance 38 of 1944 was not punitive as the same was dependent on prior   criminal   prosecution   and   determination   of   amount which was to be forfeited in the following manner: “   Further   what   s.   13(3)   of   the   1944­ 12. Ordinance   which   provides   for   forfeiture requires is that there should be in the final judgment of the criminal court a finding as to the amount of money or value of property in pursuance of s. 12. As soon as that finding is there,   the   District   Judge   would   know   the amount he is to forfeit, and the purpose of the finding is that if the District Judge is asked to 79 make   a   forfeiture   under   s.   13(3)   he   should know exactly the amount which he is require to   forfeit.   So   long   therefore   as   the   criminal court trying an offender has given a finding as to   the   amount   of   money   or   value   of   other property procured by means of the offence in the judgment that in our opinion is sufficient compliance   with   s.   12(1)   of   the   1944­ Ordinance and the requirement therein that it should   be   on   the   representation   of   the prosecution   is   a   mere   formality.   Obviously, even a determination under s. 10 of the 1943­ Ordinance as amended in 1945 of the amount procured   by   the   offence   must   be   at   the instance   of   the   prosecution   for   it   is   the prosecution which will provide the material for that determination which in turn will be the basis on which the fine will be determined by the court under s. 10. … … 14.   This   brings   us   to   the   contention   which found   favour   with   Bhattacharya   J.,   namely, that the provision of s. 13(3) is a punishment and that as the 1944­Ordinance was not in force   at   the   time   when   the   offence   was committed s. 13(3) could not be applied to the respondent inasmuch as Art. 20(1) lays down that no person shall be subjected to a penalty greater   than   that   which   might   have   been inflicted under the law in force at the time of the commission of the offence. Two arguments have been urged on behalf of the appellant in this connection. In the first place, it is urged that   the   respondent   remained   in   office   till August   25,   1944   while   the   Ordinance   came into force on August 23, 1944 and therefore the conspiracy by means of which the money was   procured   continued   till   after   the Ordinance had come into force and therefore Art.   20(1)   can   have   no   application,   for   it cannot be said that the respondent was being 80 subjected to a penalty greater than that which might   have   been   inflicted   under   the   law   in force   at   the   time   of   the   commission   of   the offence. In the second place, it is urged that the   forfeiture   provided   by   s.   13(3)   is   not   a penalty at all within the meaning of Art, 20(1), but is merely a method of recovering money belonging to the Government which had been embezzled.   It   is   urged   that   the   Government could   file   a   suit   to   recover   the   money embezzled   and   s.   13(3)   only   provides   a speedier   remedy   for   that   purpose   and   the forfeiture   provided   therein   is   not   a   penalty within the meaning of Art. 20(1).” 17.22 In   Divisional   Forest   Officer   v.   G.   V.   Sudhakar   Rao , (1985) 4 SCC 573, this Court was concerned with the power of   forfeiture   under   Section   44(2)(A)   of   Andhra   Pradesh Forest Act, 1967. Noting that Section 45 of the Forest Act prior to the amendment had a provision for civil forfeiture only after the conviction of an accused under the Forest Act, it was felt that such a provision was insufficient to prevent the growing menace of ruthless exploitation of government forests and illicit smuggling of teak, red sandalwood, etc. It was   in   this   context   that   a   separate   mechanism   was formulated to ensure that there was no unreasonable delay in confiscation of property.   81 17.23 It   may   be   noted   that   this   case   did   not   involve   a constitutional challenge under Article 20(1) to the aforesaid rules.   In   any   case,   this   Court   has   held   that   the   new mechanism   formulated   under   the   amended   Act   was completely independent of criminal prosecution. 17.24 To the same extent, in  State of Madhya Pradesh v. Kallo Bai , (2017) 14 SCC 502, this Court interpreted the Madhya Pradesh   Van   Upaj  (Vyapar   Viniyam)   Adhiniyam,   1969   to have  independent   confiscation   proceedings   from   criminal prosecution   in   view   of   the   non­obstante   clause   under Section 15C of the Adhiniyam. It may also be noted that there   was   no   challenge   to   the   aforesaid   Act,   as   being violative of Article 20(1) of the Constitution. The Court held as under:  Sub­section (1) of Section 15 empowers “14. forest officers concerned to  conduct  search to secure compliance with the provisions of the Adhiniyam. On a plain reading of sub­section (2), it is clear that the officer concerned may seize vehicles, ropes, etc. if he has reason to believe that the said items were used for the commission   of   an   offence   under   the Adhiniyam.   Confiscation   proceedings   as contemplated   under   Section   15   of   the Adhiniyam is a quasi­judicial proceedings and not   a   criminal   proceedings.   Confiscation proceeds on the basis of the “satisfaction” of 82 the   authorised   officer   with   regard   to   the commission of forest offence. Sub­section (3) of the provision lays down the procedure to be followed for confiscation under the Adhiniyam. Sub­section (3­A) authorises forest officers of rank not inferior to that of a Ranger, who or whose   subordinate,   has   seized   any   tools, boats,   vehicles,   ropes,   chains   or   any   other article as liable for confiscation, may release the   same   on   execution   of   a   security   worth double the amount of the property so seized. This provision is similar to that of Section 53 of the Forest Act as amended by the State of Madhya   Pradesh.   Sub­section   (4)   mandates that   the   officer   concerned   should   pass   a written   order   recording   reasons   for confiscation,   if   he   is   satisfied   that   a   forest offence has been committed by using the items marked   for   confiscation.   Sub­section   (5) prescribes various procedures for confiscation proceedings. Sub­section (5­A) prescribes that whenever   an   authorised   officer   having jurisdiction over the case is himself involved in the   seizure,   the   next   higher   authority   may transfer the case to any other officer of the same   rank   for   conducting   confiscation proceedings. Sub­section (6) provides that with respect to tools, vehicles, boats, ropes, chains or any other article other than timber or forest produce seized, confiscation may be directed unless the person referred to in clause ( b ) of sub­section   (5)   is   able   to   satisfy   that   the articles were used without his knowledge or connivance or, as the case may be, without the knowledge   or   connivance   of   his   servant   or agent and that all reasonable and necessary precautions had been taken against the use of such objects for commission of forest offence.” 83 17.25 In  Yogendra Kumar Jaiswal v. State of Bihar , (2016) 3 SCC 183, a Division Bench of this Court was concerned with   the   constitutional   challenge   to   various   enactments such as the Orissa Special Courts Act, 2006 and the Bihar Special   Courts   Act,   2009.   Both   the   enactments   had provisions   for   confiscation.   While   interpreting   the confiscation provisions, this Court read down the same to only mean interim attachment. In other words, confiscation was   interpreted   as   akin   to   attachment   proceedings.   The Court mandated that any confiscation would be contingent on the final outcome of the criminal proceedings and the logical   corollary   to   the   same   was   that   confiscation proceedings were not completely independent and ultimately had   to   be   adjudicated   along   with   the   trial   of   the   main criminal case.  17.26 In  , (2022) SCC Abdul Vahab v. State of Madhya Pradesh Online   SC   262,   this   Court   was   concerned   with   the interpretation   of   the   Madhya   Pradesh   Cow   Slaughter (Prohibition) Act, 2004, wherein it was held that confiscation proceedings could not be independent of acquittal in the criminal case. If a contrary interpretation was taken, then 84 the   same   would   be   violative   of   Article   300A   of   the Constitution. This Court distinguished the case from the judgment of     (supra), by placing reliance on the Kallo Bai absence   of   a   provision   such   as   Section   15C   of  Madhya Pradesh Van Upaj (Vyapar Viniyam) Adhiniyam, 1969 under the Madhya Pradesh Cow Slaughter (Prohibition) Act, 2004. 17.27 In   , Vijay Madanlal Choudary & Ors v. Union of India SLP (Civ.) No. 4634 of 2014 and others, this Court dealt with   confiscation   proceedings   under   Section   8   of   the Prevention of Money Laundering Act, 2002 (“ PMLA ”) and limited the application of Section 8(4) of PMLA concerning interim possession by authority before conclusion of final trial   to   exceptional   cases.   The   Court   distinguished   the earlier   cases   in   view   of   the   unique   scheme   under   the impugned   legislation   therein.   Having   perused   the   said judgment,  we  are  of the   opinion that  the  aforesaid ratio requires further expounding in an appropriate case, without which, much scope is left for arbitrary application.  17.28 From the above discussion, it is manifest that the Courts have   read   down   the   provisions   of   civil   forfeiture   to   be 85 dependent on the underlying criminal prosecution to temper the harsh consequences envisaged under such provisions. No doubt, such reading down was mandated to ameliorate harsh consequences of confiscatory laws which otherwise would   have   allowed   the   State   agencies   to   take   over   the property   without   seriously   pursuing   the   criminal prosecutions. At this stage, we can only recommend that the utility of independent provisions of forfeiture, distinct from criminal prosecution, needs to be utilised in a proportional manner, looking at the gravity of the offence. Few examples which may pass the muster of proportionality for having such stringent civil forfeiture, may relate to crimes involving terrorist   activities,   drug   cartels   or   organised   criminal activities. As we have discussed, the application of such a provision to numerous other offences which are not of such grave   severity,   would   be   of   serious   risk   of   being disproportionate,   if   procedures   independent   of   criminal prosecution   are   prescribed.   We   may   note   that   the proportionality   of   separate   confiscation   procedure prescribed under the 2016 Act, has not been argued herein. Accordingly, we leave the aforesaid question of law open.  86 17.29 Under the IPC, forfeiture is recommended to be a form of punishment   under   Section   53.   Accordingly,   the   Code   of Criminal   Procedure,   1976   provides   for   a   mechanism   for interim   custody   and   forfeiture   at   the   conclusion   of   trial under Section 451 of the Cr.P.C. ( in personam   forfeiture), which reads as under:

87 person   claiming   to   be   entitle   to   possession thereof   or   otherwise,   of   any   property   or document produced before it or in its custody, or regarding which any offence appears to have been committed, or which has been used for the commission of any offence. Aforesaid   provisions   under   the   Cr.P.C.   have   inbuilt safeguards   of   in   personam   criminal   forfeiture,   wherein confiscation   occurs   at   the   end   of   the   trial.   Under   these provisions, confiscation is to be determined at an evidential standard of ‘beyond reasonable doubt’ and are dependent on the result of the criminal trial.  17.30 Coming   to   the   Benami   Act   post   the   Amendment,   the interplay   of   Sections   27(3),   (5)   and   67   of   the   2016   Act creates a confiscation procedure which is distinct from the procedure   contemplated   under   the   CrPC   or   any   other enactment   till   now   in   India.   This   separation   of   the confiscation   mechanism   is   not   merely   procedural.   It  has also altered substantive rights of the evidentiary standards from   ‘beyond   reasonable   doubt’   to   ‘preponderance   of probabilities’. Such a change of standards cannot be merely termed as procedural. 88 17.31 Characterization   of   the   confiscation   proceedings   under Chapter IV of the 2016 Act as Civil may therefore not be appropriate. There is an implicit recognition of the forfeiture being a punitive  sanction, as the  Officer is mandated to build   a   case   against   the   accused   for   such   confiscation, wherein   the   presumption   of   innocence   is   upheld structurally. Being a punitive provision, it is trite that one integrates   the   ‘presumption   of   innocence’   within   the Chapter   as   the   same   forms   a   part   of   the   fundamental 10 right. 17.32 Additionally, the 2016 Act now condemns not only those transactions   which   were   traditionally   denominated   as benami,   rather   a   new   class   of   fictitious   and   sham transactions   are   also   covered   under   the   same.   In   this regard, we may notice that the intention of the legislature is to condemn such property and there is an implicit effort by the Parliament to take into consideration the fact that such transactions are often acquired from ill­gotten wealth. These proceedings cannot be equated as enforcing civil obligations 10 Narendra Singh v. State of Madhya Pradesh , (2004) 10 SCC 699. 89 as, for example, correcting deficiencies in the title. It goes further and the taint attaches to the proceeds as well.  17.33 In view of the above discussion, it is manifest that the 2016 Act contemplates an     forfeiture, wherein the taint of in­rem entering into such a benami transaction is transposed to the asset itself and the same becomes liable to confiscation. At the cost of repetition, we may note that the taint of benami transactions is not restricted to the person who is entering into the aforesaid transaction, rather, it attaches itself to the property   perpetually   and   extends   itself   to   all   proceeds arising from such a property, unless the defence of innocent ownership is established under Section 27(2) of the 2016 Act.   When   such   a   taint   is   being   created   not   on   the individual, but on the property itself, a retroactive law would characterize itself as punitive for condemning the proceeds of sale which may also involve legitimate means of addition of wealth. 17.34 Jurisprudentially, a law may enable forfeiture of property by peculiar reason of its circumstances, of it being dangerous to the community by reasons of any form or position that it assumes.   In   such   cases,   forfeiture   is   not   deemed   to   be 90 punishment inflicted on its owner. By contrast, if the law provides that the Government shall forfeit a property ‘A’ for, (1) what was carried on in property ‘B’, or (2) what the owner does in a matter not connected with property ‘A’ or (3) a bare intent which does not necessarily relate to the conduct in   property   ‘A’,   in   such   cases,   forfeiture   is   punishment without any exception. In this case, the property may not be inherently dangerous or denigrate any standard of morality. It is just the condemnation of the method of transfer and holding,   which   was   once   a   recognized   form   of   property holding in India. In such a case, the   civil proceeding in rem utilized retroactively, would characterize itself as penal. 17.35 In   the   case   at   hand,   the   authority   that   initiates   such confiscation,   is   granted   extensive   powers   of   discovery, inspection, compelling attendance, compelling production of documents.   They   are   further   empowered   to   take   the assistance   of   police   officers,   custom   officers,   income   tax officers   and   other   relevant   officers   for   furnishing information. It is also pertinent to note that any person who fails   to   furnish   information,   is   subjected   to   a   penalty   of 91 ₹ 25,000/­   (Rupees   Twenty­Five   Thousand)   under   Section 54(A).   It   is   also   necessary   to   note   that   a   person   who supplies false information before any authority, is subjected to rigorous imprisonment of upto 5 years under Section 54 of the 2016 Act. 17.36 This Court is aware of the fact that the ‘Right to Property’ is not a fundamental right, rather it is a constitutional right that can be abridged by law. However, this Court is not concerned   with   the   constitutionality   of   such   a   measure, wherein such considerations have to be balanced. Rather, the   focus   is   only   on   the   characterization   of   retroactive confiscation, which in these facts and circumstances, are punitive.  17.37 In view of the fact that this Court has already held that the criminal provisions under the 1988 Act were arbitrary and incapable   of   application,   the   law   through   the   2016 amendment could not retroactively apply for confiscation of those   transactions   entered   into   between  05.09.1988   to 31.10.2016  as   the   same   would   tantamount   to   punitive punishment,   in   the   absence   of   any   other   form   of punishment.   It   is   in   this   unique   circumstance   that 92 confiscation   contemplated   under   the   period   between 05.09.1988   and   31.10.2016  would   characterise   itself   as punitive,   if   such   confiscation   is   allowed   retroactively. Usually,   when   confiscation   is   enforced   retroactively,   the logical reason for accepting such an action would be that the continuation of such a property or instrument, would be dangerous for the community to be left free in circulation. In R (on the appln of the Director of the Assets Recovery , [2004] EWHC Agency) v Jia Jin He and Dan Dan Chen Admin 3021, where Collins, J. had stated thus:  “52.   In   Mudie,   at   page   1254,   in   the judgment of Laws LJ, who gave the only reasoned   judgment,   there   is   set  out   the citation from Butler which reads, so far as material, as follows:  "It is the applicant's contention that the forfeiture of his money in reality represented   a   severe   criminal sanction,   handed   down   in   the absence of the procedural guarantees afforded to him under article 6 of the Convention, in particular his right to be   presumed   innocence   [sic].   The court does not accept that view. In its opinion,   the   forfeiture   order   was   a preventive   measure   and   cannot   be compared   to   a   criminal   sanction, since it was designed to take out of circulation   money   which   was presumed to be bound up with the international trade in illicit drugs. It 93 follows that proceedings which led to the   making   of   the   order   did   not involve   'the   determination   ...   of   a criminal charge (see Raimondo v Italy [1994] 18 EHRR 237, 264, at para 43; and   more   recently   Arcuri   v   Italy (Application   No   52024/99), inadmissibility   decision   of   5th   July 2001..."” 17.38 When we come to the present enactment, history points to a different   story   wherein   benami   transactions   were   an accepted form of holding in our country. In fact, the Privy Council had, at one point of time, praised the   sui generis evolution of the doctrine of trust in the Indian law. The response by the Government and the Law Commission to curb benami transactions was also not sufficient as it was conceded before this Court that Sections 3 and 5 of the 1988 Act in reality,   dehors   the legality, remained only on paper and were never implemented on ground. Any attempt by the legislature to impose such restrictions retroactively would no doubt be susceptible to prohibitions under Article 20(1) of the Constitution. 17.39 Looked at from a different angle, continuation of only the civil provisions under Section 4, etc., would mean that the legislative intention was to ensure that the ostensible owner 94 would continue to have full ownership over the property, without allowing the real owner to interfere with the rights of benamidar. If that be the case, then without effective any enforcement proceedings for a long span of time, the rights that   have   crystallized   since   1988,   would   be   in   jeopardy. Such implied intrusion into the right to property cannot be permitted to operate retroactively, as that would be unduly harsh and arbitrary. 18. Conclusion 18.1 In view of the above discussion, we hold as under:  a) Section 3(2) of the unamended 1988 Act is declared as unconstitutional   for   being   manifestly   arbitrary. Accordingly,   Section   3(2)   of   the   2016   Act   is   also unconstitutional as it is violative of Article 20(1) of the Constitution. b) In   rem   forfeiture   provision   under   Section   5   of   the unamended Act of 1988, prior to the 2016 Amendment Act, was unconstitutional for being manifestly arbitrary.  c) The  2016  Amendment  Act  was  not merely  procedural, rather, prescribed substantive provisions.  95 d) In rem   forfeiture provision under Section 5 of the 2016 Act,   being   punitive   in   nature,   can   only   be   applied prospectively and not retroactively. e) Concerned   authorities   cannot   initiate   or   continue criminal   prosecution   or   confiscation   proceedings   for transactions entered into prior to the coming into force of the 2016 Act,   viz. , 1.11.2016. As a consequence of the above declaration, all such prosecutions or confiscation proceedings shall stand quashed.  f) As this Court is not concerned with the constitutionality of such independent forfeiture proceedings contemplated under the 2016 Amendment Act on the other grounds, the aforesaid questions are left open to be adjudicated in appropriate proceedings.  18.2 The appeal is disposed of in the above terms. ...........................CJI. (N.V. RAMANA)         ...........................J. (KRISHNA MURARI) ...........................J. (HIMA KOHLI) NEW DELHI; AUGUST 23, 2022. 96